test [Source: test] (click image to enlarge)The population of Buenos Aires grows from 3 to 9.5 million. During this time, the city’s public water and sewage utility company, Obres Sanitarias, is hit with a number of budget cuts recommended by the IMF and World Bank, and cannot afford to implement the needed upgrades and improvements. By the late 1980s, it is apparent that the utility will need a huge infusion of capital to extend its services to the new inhabitants of the city. [Public Citizen, 6/14/2007] Less than two thirds of the city’s population is connected to the water system while less than half has access to the sewers. Moreover, up to 50 percent of the system’s water is lost because of leaks. As a result, the per capita consumption of water is an extremely high 600 liters per customer. [Inter Press Service, 4/13/1993; CBC News, 3/31/2004] The World Bank steps in and offers to lend Argentina hundreds of millions of dollars to upgrade the city’s water infrastructure—but only on the condition that it privatize Obres Sanitarias. [Public Citizen, 6/14/2007] Critics of the privatization plan will later argue that despite its lack of cash-on-hand, Obras Sanitarias was a “well-run company” with little debt and was capable of expanding on its own—had it been sufficiently funded. [Santoro, 2/6/2003]

Aguas Argentinas, a recently formed consortium of private companies, wins a 30-year concession to operate Buenos Aire’s water utility. It is awarded the concession because it promised a greater reduction in water rates than the other bidders. But it was close. Aguas Argentinas’s bid was 26.9 percent, just a fraction higher than the bid of another company, Aguas de Buenos Aires, which offered a rate decrease of 26.1 percent. According to the concession agreement, the company cannot raise rates for at least 10 years (rates have risen 62 percent since privatization was put on the agenda two years ago (see 1991-1993)). Additionally, it must invest $1.4 billion in the system, and connect more than 4,200,000 people to water and 4,800,000 to sewage systems. The foreign stakeholders in Aguas Argentinas include French companies Compagnie Générale des Eaux (later known as Vivendi; 8 percent), Lyonnaise des Eaux (later known as the Suez Group; 25.3 percent), Sociedad General de Aguas de Barcelona (12.6 percent), and Anglian Water (4.5 percent). The remaining stakes are held by Argentine companies Bank of Galicia (8.1 percent), Grupo Meller (10.8 percent), and Sociedad Comercial del Plata (20.7 percent). Grupo Meller is run by Sergio Meller, a supporter of Argentine President Carlos Menem, and Sociedad Comercial del Plata is owned by businessman Santiago Soldati, another close ally of Menem. [Santoro, 2/6/2003]

Buenos Aires’ public water utility, Obras Sanitarias, is privatized under heavy pressure from the World Bank, the IMF, and the US government. It is taken over by Aguas Argentinas, a recently formed consortium of private companies that won a 30-year concession to manage the city’s water and sewage system (see December 9, 1992). The deal represents the largest transfer in history of a water service and watershed to the private sector. The consortium will be responsible for providing water to the residents of Buenos Aires and 14 surrounding municipalities—some 10 million people (see also 1980s-1993). Oversight of Aguas Argentinas will be conducted by the newly formed regulatory body, ETOSS (Ente Tripartito de Obras y Servicios Sanitarios). Its task will be to monitor the quality of service, represent customers, and ensure that the company fulfills the terms of its contract. [Inter Press Service, 4/13/1993; Santoro, 2/6/2003; CorpWatch, 2/26/2004; CBC News, 3/31/2004; Public Citizen, 6/14/2007]

Aguas Argentinas, a privately owned company that provides the city of Buenos Aires with its water supply, petitions the newly established government authority, ETOSS, for a rate increase of 13.5 percent. The company had previously agreed not to seek any rate increases for 10 years (see April 28, 1993). But according to Carlos Ben of Aguas Argentinas, “What was said in 1993, that there was not going to be an increase in rates for 10 years, was not meant in absolute terms. It was to indicate to the bidders that they should not put a speculative number [on rate reductions]. There was not a presumption of a freezing of rates.” [Santoro, 2/6/2003] The company also claims that it has suffered $23 million in losses because of “extra-contractual costs,” such as speeding up service in very poor neighborhoods. ETOSS, whose operations are financed through the collection of 2.6 percent of Aguas Argentinas’ revenue, approves the request on the condition that the company expedite expanding water and sewage service to the “villas de emergencia” (shanty towns), and that it implement a plan to eliminate the use of well water, which is heavily contaminated with nitrates. [Santoro, 2/6/2003; CBC News, 3/31/2004; Public Citizen, 6/14/2007] A decade later, Menahem Libhaber, the chief water and sanitation engineer for the World Bank in Latin America, will tell the International Consortium of Investigative Journalists that false promises are simply part of the game. “You get into the business with low rates or high commitments—all the while telling yourself, ‘When we are in we will renegotiate,’ The public sector has to be aware,” he says, that companies are disingenuously putting their best foot forward. “Sometimes it’s a game to get into the business.… And they [the companies] have leverage once they are in.” [Santoro, 2/6/2003]

By this date, Aguas Argentinas, the company hired in 1993 to provide water and sewer service to the residents of Buenos Aires (see April 28, 1993), has invested roughly 45 percent less ($300 million) on expanding services than required by its contract. The company blames the failure on bad debt, late payments, and a downturn in the Argentine economy. During this period, the company has been able to maintain a comfortable 20 percent profit margin. [CBC News, 3/31/2004]

An Argentine congressional commission issues a report accusing Aguas Argentinas, a consortium of private water companies that took over management of the city’s water and sewer system in 1993 (see April 28, 1993), of “serious and grave” breaches of contract, failing to meet goals regarding infrastructure development, and failing to inform its regulatory body, ETOSS, of its operations. It orders the company to suspend new connection fees for 800,000 new users in Buenos Aires. [Santoro, 2/6/2003; CBC News, 3/31/2004; Public Citizen, 6/14/2007]

A 2003 report by the Center for Public Integrity finds that 10 years after the privatization of Buenos Aires’ water and sewer services (see April 28, 1993), poor neighborhoods still lack access to safe drinking water. The report cites the example of the Parravicino household, which lives in one of the poorest areas of Buenos Aires. “Mario Parravicino, who lives with his family in the dusty city of La Matanza, gets up each morning praying silently that it won’t rain. ‘When it rains it often floods and the sewage gets into everything,’ says the 60-year-old factory worker. ‘You can’t use the toilet because it backs up. It’s disgusting.’ La Matanza is among the poorest districts in the Buenos Aires metropolitan area, a maze of tiny cinder-block homes wedged together along dirt roads. There are no sewers, so the rains flood its houses and septic tanks, which often overflow into wells. Boiling is the only form of water treatment, and not everyone can afford the gas to boil the water. Nitrate levels, caused by sewage contamination, are dangerously high and waterborne diseases common. In Argentina, intestinal infestations cause 20 percent of infant deaths. Across town in Laferrere, the Rusman family has the same problem. Their well is only two meters from the septic tank, and the water is often suspiciously murky after a rainfall. ‘Whenever we can we boil it before drinking,’ Alejandra Rusman explained. ‘But we don’t often have money to pay for gas.’ The local church provides drinking water to those who can’t pay for gas, but the Rusmans don’t wish to be beggars. Alejandra worries constantly about her two sons Pablo and Martin, aged 7 and 4. ‘This situation is dangerous because we forget and the boys drink this cloudy water and it makes them sick,’ she said.” The reports also notes, “A country that only 10 years earlier had Latin America’s highest standard of living was now on a level with Jamaica; half of Argentina’s 37 million people lived below the poverty level.” [Santoro, 2/6/2003]

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